CSD marks decade of excellence

The Central Securities Depository (CSD) will this month mark ten years since it went live. It is worth noting that it has not just been a decade of working without hitches but what is important such obstacles have been overcome growing the institution into one of the leading securities depositories in Africa.

Despite being in operation for a decade there are quite a good number of people who know little about the operations of the securities depository.

Experts define CSD as a specialist financial organisation holding securities such as shares either in certificated or uncertificated (dematerialised) form so that ownership can be easily transferred through a book entry rather than the transfer of physical certificates.

This, according to the experts, allows brokers and financial companies to hold their securities at one location where they can be available for clearing and settlement. This is usually done electronically making it much faster and easier than was traditionally the case where physical certificates had to be exchanged after a trade had been completed.

The creation of CSD

The establishment of the Central Securities Depository (CSD) is a vision embodied in Ghana’s Financial Sector Strategic Plan (FINSSP) which sought to reform the financial system to attract investors into the Ghanaian economy.

Bank of Ghana spearheaded the establishment of the Central Securities Depository (CSD) alongside the introduction of an Electronic Auction system to handle the issue, custody, dealing and redemption of government securities.

This led to the establishment of an implementation committee to supervise the smooth implementation of a Central Securities Depository (CSD) to cater for all securities in Ghana. Membership was drawn from Ministry of Finance, Bank of Ghana and Ghana Stock Exchange.

The vision of the CSD was to manage the issue, redemption and maintaining records of ownership for securities issued by Government of Ghana, Bank of Ghana and the Ghana COCOBOD. The Ghana Stock Exchange also established GSE Securities Depository Co Ltd (GSD) to handle equities.

But in January last year after consultation with stakeholders, the two depositories merged, with Bank of Ghana having a stake of 82 percent while 18 percent of CSD is owned by GSE. It now operates completely as a single entity managing both debt and equity securities.

The merger between the two entities has been hailed by industry players with the Head of Databank Brokerage Armah Akotey, remarking that the merger is fuelling speedy and easy undertaking of business in Ghana’s securities market.

“With the depository in place, now it is easy to drive credit lending. One main barrier to lending in our part of the world is the issue of collateral, but when you have your securities at the depository it can be used as collateral for credit because the lender can easily confirm how much you have with the depository,” he said.

Under the CSD system, there is total elimination of risk such as the loss, mutilation and theft of certificates associated with holding and trading of paper-based securities of investors. The CSD system ensures Delivery vs. Payment (DVP) where securities and funds are settled simultaneously.

The CSD system has brought a significant reduction in the errors and delays associated with paper-based manual processing and as a result brought efficiency in the clearing and settlement in the securities market.

This bring afore the primary objective of the CSD, which is to reduce risk and improve efficiency.

There exist a signed agreement between the CSD and its participants for the maintenance of strict confidentiality of information and also to operate within the confines of the rules and regulations of the CSD. The CSD records are maintained electronically and therefore cannot be stolen or it getting lost. The CSD also maintains a well secured back up system to ensure business continuity and integrity of its data.

Commenting on the achievement of the Depository, CEO of the CSD, Mr. Stephen K. Tetteh touted the confidence the CSD has brought into the market within this short time of 10 Years. He said, “Sometimes it is good to start late because it allows you to learn from the mistakes of others. Now the whole market have realised we need to work together to holistically achieve our objectives as partners,”

He mentioned the support received from the Bank of Ghana, Securities and Exchange Commission (SEC), the Ghana Stock Exchange and the Ministry of Finance in bringing the Depository this far.

Going forward, Mr. Tetteh appealed to the investing public to deposit their certificates to the depository, saying, “We need the public to surrender their certificates to the depository from which they stand to derive lots of benefits.” Available data shows that out of 9.76 billion share listed on the Ghana Stock Exchange, 8.62 billion of the figure, representing about 88.24% percent has so far been migrated onto an electronic platform as at September 31, 2014.

Tenth anniversary

The anniversary celebrations starts today with the official launch of the anniversary at the Alisa Hotel in Accra where a key note address will be delivered by the Finance Minister Hon. Seth Terkper.

There will be further activities subsequently including a seminar, an outreach programme at the University of Ghana Business School on the topic “Role of the CSD in the Ghana’s Financial Market.”

On Wednesday, there will be an anniversary lecture on the topic “Depository Services in Ghana –The next Decade” which will round up activities marking the anniversary.